Macquarie on track to deliver full-year earnings of $2.8bn

Macquarie Group is forecast to deliver another record profit after chief executive Nicholas Moore said the company's operating performance for the quarter ended June 30 was up on the same period a year earlier.

Not surprisingly, the Sydney-based asset manager and investment bank left its financial year 2019 guidance unchanged.

The group’s result for the full-year is still expected to be "broadly in line" with last year's result subject to Moore's usual caveats about the impact of market conditions, foreign exchange impacts, and regulatory changes.

To the nation's banking analysts though the solid first quarter result flagged earnings growth of 9 per cent putting the investment banker’s annual profit at around $2.78 billion for 2019. 

Macquarie’s full-year profits jumped 15 per cent to $2.56 billion for the year ended March 31, comfortably beating analysts’ forecasts.

In the first quarter trading update, Macquarie said its annuity-style businesses - which represent 70 per cent of earnings - continued to perform well, with continued strong base and performance fees in the Group’s asset management arm.

The annuity-style businesses include the group’s asset management business, corporate leasing and financing operations as well as its banking and financial services division.

Global assets under management which printed at $534 billion for the quarter was a positive surprise since the business had not grown much in the last few years.

Strong performer

Macquarie said its infrastructure business continued to perform strongly - first quarter raisings were strong at $5.6 billion and assets under management reached $102 billion.

Another standout performer was the bank’s mortgage division which delivered 20 per cent  annualised growth in the quarter.

Macquarie’s capital markets-facing businesses, which includes commodities and global markets - experienced strong trading conditions across most markets, the bank said. 

It added that debt capital markets activity was lower compared to the prior corresponding period.

Of the update Moore said: “Macquarie remains well positioned to deliver superior performance in the medium-term due to its deep expertise in major markets, strength in diversity and ability to adapt its portfolio mix to changing market conditions, the ongoing benefits of continued cost initiatives, a strong and conservative balance sheet and a proven risk management framework and culture.”

UBS analyst Jon Mott noted that over the last three years Macquarie’s earnings have grown 59 per cent. This can be attributed to: 18 per cent revenue growth; 20 per cent operating leverage/‘Jaws’ and 21 per cent lower tax rate. 

"We expect this trend to continue,” he said.

“With a dearth of investment opportunities across Australian financials, we expect the market to continue to support Macquarie despite its price performance. However, we would not be surprised to see some consolidation in the share price near term.”

Mott is forecasting an annual profit of $2.78 billion for 2019.

Meanwhile, Morgan Stanley's Andrei Stadnik is at the top of the market with a forecast of $2.81 billion saying a good CEO succession and a good first quarter increases Macquarie's chances of beating consensus earnings of $2.70 billion. 

For his part, Morningstar's David Ellis noted the retirement of Moore and promotion of Wikramanayake overshadowed the " brief but in line" first quarter update. Ellis is forecasting an annual profit of $2.70 billion.

Macquarie’s financial position comfortably exceeds the Australian Prudential Regulation Authority’s Basel III regulatory requirements with Group capital surplus of $3.4 billion at 30 June 2018. 

 

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